Higher unemployment in Canada fuels expectations of rate cuts

According to preliminary estimates from economists surveyed by FXStreet, Canada’s unemployment rate rose from 7% to 7.1% in June. Experts also suggest no new jobs were created in the country during that period, compared to a gain of 8,800 jobs in May. This could prompt the Bank of Canada (BoC) to resume its monetary easing cycle.

At its June meeting, the central bank kept interest rates unchanged. The regulator cited increased uncertainty due to the US administration's unpredictable trade policies as the reason for this decision.

Bank of Canada Governor Tiff Macklem said the central bank could cut borrowing costs in July if the economy weakens due to the potential impact of Donald Trump’s import tariffs. Macklem noted that Q2 GDP growth will likely be much weaker than in Q1.

However, FXStreet analysts warn that a BoC rate cut may hurt the Canadian dollar. The loonie has already given back some of its recent gains, so the exchange rate of the US dollar against the Canadian currency rose from the October 2024 level of 1.355 to 1.3700 by the end of the week.